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The chief executive of Britain’s Financial Conduct Authority has told Bitcoin investors that they could lose all their money.

Andrew Bailey spoke out after the cryptocurrency soared in price to a new record-breaking high after several weeks of astonishing growth.

‘It’s not a currency, it’s actually not regulated in its Bitcoin form,’ he said in an interview with Newsnight.

‘It’s a very volatile commodity in terms of its pricing.

‘If you look at what has happened this year, I would caution people. We know relatively little about what informs the price of Bitcoin.

‘It’s an odd commodity as well, as the supply is fixed. If you want to invest in Bitcoin be prepared to lose your money – that would be my serious warning.’

This graph shows the rise of Bitcoin over the past year (Photo: Coinbase)

Bitcoin blasted to another all-time high of almost $18,000 (£13,500) on the Bitstamp exchange on Friday.

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The cryptocurrency has shot up in price by 1,700 percent since the start of the year, driving worries that the market is a bubble that could burst in spectacular fashion.

Bitcoin has climbed almost 80 percent so far in December alone, putting it on track for its best month in percentage terms since December 2013.

On Friday it reached as high as $17,900 (£13,400) on the Luxembourg-based Bitstamp exchange.

Investors are also trading in other cryptocurrencies such as Litecoin and Ethereum (Credit: Bitcoin, LiteCoin, Ethereum, Ripple)

A study by Anglia Ruskin University, Trinity College Dublin and Dublin City University released on Friday said Bitcoin could pose a threat to the financial stability of traditional currencies and markets.

‘Our evidence finds that the price of Bitcoin has been artificially inflated by speculative investment, putting it in a bubble,” said Larisa Yarovaya, one of the report’s authors and a lecturer at Anglia Ruskin University.

‘Although bitcoin is not regulated by governments, it could still have a knock-on effect on traditional markets due to the interconnectedness of cryptocurrency markets with other financial assets.’

However, others say the size of the Bitcoin market is not large enough to have a knock-on effect on financial stability.